MONEY

Ocean City hotels: Airbnb isn't playing fair

Jeremy Cox
jcox6@dmg.gannett.com
General Manager of the Clarion Resort Fontainebleau Mark Elman says Airbnb rentals operate on an unfair playing field.

Mark Elman doesn't mind competition.

He oversees the Clarion Resort Fontainebleau in Ocean City, which parlays its 40,000-square-foot conference center and beachfront location into a brisk business of booking. And he also does just fine with the 84 units he manages next door at the Marigot Beach condominium.

But Elman isn't quite so accommodating with websites like Airbnb. Many of the people who use the sites to rent out a room or a whole house are dipping into the same pool of customers as he is without getting splashed with the same taxes and licensing fees, he said.

“Certainly they have every right to rent their house or condo, but we would expect them to pay their taxes for their houses or condos just like we rent," said Elman, the Clarion's general manager. “We’re not trying to put them out of business, but we’re looking for that level playing field."

Elman and other members of the resort's hotel and lodging industry are looking to Annapolis for help. They want Airbnb rentals to comply with the same regulations they face, including having to register as short-term rentals and paying occupancy and sales taxes.

READ MORE: Ocean City urges restraint with short-term rentals

“The bottom line is this is a business activity," said Amy Rohrer, president and CEO of the Maryland Hotel and Lodging Association. "Tax should be paid both on the revenue the host is collecting as well as the fee Airbnb and other short-term rental platforms” are collecting from the rentals.

In response to questions, Airbnb issued a statement, saying the company looks forward to working with state lawmakers on clearing up the tax issues next spring, when legislators return to Annapolis. A tax-collecting program that began earlier this year in Montgomery County would serve as a good model for the legislation, the company said.

In Ocean City, officials are waiting to see what happens at the state level before taking any action of their own. In the meantime, they continue to monitor Airbnb's listings for potential noncompliance with registration and tax requirements.

“It’s definitely a concern," said Jessica Waters, the town's spokeswoman. "When we become aware of a  property that’s not licensed, we extend our enforcement efforts.”

Short-term rentals are required to get two licenses in Ocean City: a $116 rental license and a $25 noise-control permit.

Susan Jones, executive director of the Ocean City Hotel Motel Restaurant Association, compared her industry's plight with Airbnb to the struggle between taxi drivers and ride-sharing services such as Uber and Lyft. The latest market entrants have managed to steer clear of several requirements, most notably a medallion that costs $7,000 to buy and up to $500 to renew each year.

Any new legislation needs to recognize that such services are here to stay, Jones said.

"It is a sharing economy," she said. "You’re not going to get rid of it.”

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Airbnb was founded in 2008, but it didn't start to take root in Ocean City until last year. The number of listed properties in the area's market, which extends beyond the town limits, surged from 62 in 2015 to 412 this year, according to Airdna.

The number of listings within the town appears to be much lower. A site search conducted earlier this week for a hypothetical stay in January just within Ocean City turned up 103 search results.

Ocean City isn't the only destination grappling with how to deal with Airbnb.

Portland, Oregon, legalized short-term rentals in 2014. San Francisco, where Airbnb is headquartered, legalized them last year. In New York City, renting out an extra room or couch is fine, but it’s illegal to rent most apartments for fewer than 30 days. New York’s state Attorney General Eric Schneiderman said in 2014 that three-fourths of New York City Airbnb listings were illegal. The company said it removed many of those listings, but some New Yorkers blame Airbnb for helping to drive rents up.

Bills in Maryland's House and Senate died in committee earlier this year. They would have created a framework for Airbnb to remit taxes itself but included none of the other licensing and regulatory mechanisms sought by the hotel industry.

The proposed tax system was flawed as well, Rohrer said. Since Airbnb would have been made responsible for collecting the taxes from rentals, it would have been impossible for that information to be audited, she said.

Ocean City, for its part, is no stranger to new technologies effecting change in the accommodation sector, dating to the earliest days of Craigslist, Waters said. That experience has proved that the biggest challenge is educating people about the laws they have to follow.

The owner of an Ocean City rental who uses Airbnb said she has registered as a rental and obtained the noise-control permit. She wasn't sure whether the rental has been remitting taxes, saying her accountant handles such details. But she said: "“The rule’s the rule, you’ve got to play by the rule.”

READ MORE: Dewey Beach explores tighter business regulations

The owner, who asked to be identified only by her first name, Michelle, for fear of backlash from anti-Airbnb people, said she had never heard of the website until a friend mentioned it to her in 2014. She and her family live in Baltimore County but visit their condo when they can, renting it out when they can't.

“I love it," Michelle said. "Because I’m very social, I love the social aspect of it.”

She savors serving as a sort of concierge, questioning guests about their interests and giving them detailed tips to make their stay more enjoyable.

“It’s like five pages of what to do while they’re there. I give them me. Instead of going to Ocmd.com, I give them the Michelle version of what you should do," she said.

While hotels view her and other Airbnb rentals as operating on an unfair playing field, she doesn't see herself being on the same field at all. She courts a different sort of client, one seeking a no-frills place to stay in a resort with plenty of other frills to go around.

“The hotels are for people who want to come down for a few nights or they want housekeeping or a restaurant on-site," Michelle said.

The Associated Press contributed to this report. 

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